CSS variables, also known as custom properties, allow developers to use reusable, user-defined values throughout stylesheets, enhancing code maintainability and reducing repetition. These variables are dynamically adjustable, supporting real-time changes via JavaScript, and can be scoped globally or locally. The tutorial details practical applications by showcasing four projects: button variations, theme-based design, responsive login forms, and JavaScript-free dynamic elements, each illustrating the versatility of CSS variables in various scenarios. CSS variables differ from SASS variables, offering runtime modifications and direct browser usage, though they can result in slightly higher runtime costs. Best practices include logical grouping and meaningful naming of variables, while common troubleshooting involves ensuring fallbacks for unsupported older browsers and understanding their limitations in certain CSS properties.